Target might be taking a step to fix the most problematic part of its business

Sign
for a Target store is seen in the Chicago suburb of Evanston,
IllinoisThomson
Reuters

Target is getting ready to phase out its grocery supply
chain.

The company is seriously
considering partnerships with outside companies to make the fresh
food supply chain more reliable, COO John Mulligan told
Reuters.

Target’s grocery offerings
recently evolved to include more fresh food. However, as products
shifted to meet customer demand for healthy and organic food,
Mulligan says the supply chain became a patchwork system that is
not fully reliable in many parts of the country.

In August, Target blamed its "incredibly complex supply
chain" for understocked stores this year, reporting that
in-store product levels had been getting worse over the last
couple of quarters. Understocking issues have
further aggravated Target's weak grocery sales over the
last few years.

Groceries, fresh produce, meat, dairy, and other similar
offerings need to be replenished 100 time or more every year. Any
miscalculation or shortage from an outside distributor
immediately impacts Target sales, as shelves remain
unstocked.

As Target works to improve its
grocery business, e-commerce has been a major concern, as Walmart
and Amazon continue to surge ahead of the company.

Patrick Hoesly / Flickr, CC

In September, the company
partnered with Instacart to offer same-day delivery of groceries
and other household items in select areas. Target told investors
in March that the company planned to spend $1 billion to improve
its supply network and online sales tech.

Target has not yet provided any
names of potential partners, or revealed a timeline of when it
would announce its decision. However, Reuters reports that
analysts and consultants suggest that likely candidates might
include Minneapolis-based retail chain SuperValu, North
Carolina-based wholesale distributor MDI, and regional wholesale
co-operatives including Affiliated Foods Midwest and Washington
state-based URM Stores Inc.